Signs of economic progress in Tunisia overshadowed by political instability

Despite the gains, many have yet to find relief from economic hardships that have hit the country since 2011.

Sunday 02/09/2018

Troubled waters. View of containers at a loading terminal in the port of Rades in Tunis. (Reuters)

TUNIS - The Tunisian economy showed signs of growth during the second quarter of 2018, giving ammunition to Prime Minister Youssef Chahed in his promise to turn the country’s economic indicators “green by the end of 2019.”

However, the relatively strong numbers did little to help Chahed shore up political support in a government that has been fractured by infighting.

Tunisia’s Islamist Ennahda Movement, the main backer in Chahed’s coalition government, said the prime minister should step down if he aimed to run for presidential elections next year and a former minister predicted Chahed would resign after October 15 because of shrinking political support.

The development raises concerns about political instability in Tunisia, where eight governments since 2011 have been unable to address the country’s social and economic woes.

The state-run National Institute of Statistics on August 16 — almost two years after Chahed became prime minister — said economic growth for the April-June 2018 period expanded 2.8% compared to the same quarter last year. That marked the highest growth rate since 2014.

Most economic sectors contributed to the growth. Previous periods of economic improvement were driven mostly by agriculture, which fluctuates based on weather and domestic consumption.

This comes after a 2.2% growth rate for the first quarter of 2018, making the growth rate for the first six months of the year 2.6%. The growth rate for the first half of 2017 was 1.9%, the institute’s figures showed.

Tunisia’s economy grew at an average annual rate of 1.1% from 2011-15, a figure considered anaemic for a middle-income country that registered an average growth of 5% in the two decades before 2011.

This year’s growth was supported by a 2.4% expansion of the job-intensive and export-oriented textile and clothing industry, as well as 2.6% rise in the chemical business.

The non-manufacturing sector, which includes mining and energy, grew 1.3% on the back of recovery of key foreign currency earners phosphate and oil activities, which had stagnated due to social protests.

The country’s services sector rose 3.6%, bolstered by an 11.5% increase in tourism. Tunisia expects record tourism, with more than 8 million arrivals this season.

The National Institute of Statistics reported a 5.5% growth in the financial sector and a 3.2% increase in communication and new technology businesses.

Despite the gains, many have yet to find relief from economic hardships that have hit the country since 2011. The unemployment rate, for example, was unchanged at 15.4%, which is the highest joblessness figure in the Maghreb.

The construction and building materials sector declined 2.3% because few middle-class families bought homes due to high inflation and higher costs for loans.

Tunisia plunged into an economic crisis after the 2011 ouster of President Zine el-Abidine Ben Ali. Since then, the Tunisian government has failed to cut the budget deficit or tame inflation. Tunisia, with foreign currency reserves at their lowest in 20 years, needs $3 billion in foreign loans this year to keep the economy afloat.

Tunisia reached a 4-year, $2.8 billion loan deal with the International Monetary Fund in 2016 tied to economic reforms that included reducing the budget deficit, depreciating the local currency and dropping public sector wages as a proportion of the budget.

Chahed has weathered protests against reforms from around the country as well as political opposition from within his own Nidaa Tounes party. In May, Nidaa Tounes Executive Director Hafedh Caid Essebsi, the son of Tunisian President Beji Caid Essebsi, said Chahed should step down, citing “multiple failures.”

Chahed’s stay in office, however, hinges on Ennahda, which previously refused to back a change in the head of government out of concern for “government stability” but, on August 16, Ennahda said Chahed must publicly relinquish any bid for the 2019 presidential race or lose the party’s backing in government.

Ennahda leaders said their position was to ensure the cabinet functioned efficiently to implement reforms and was neutral ahead of next year’s elections.

Analysts say the Islamist group aims to clear the way for party leader Rached Ghannouchi to run for president. Liberal parliament members and other centre-left political activists see Chahed as the only candidate who could beat an Islamist contender for the presidency.

Chahed provided no comment on the debate and political bargaining, including a threat by Nidaa Tounes to withdraw its ministers from the government.

Nidaa Tounes officials recently said Ennahda would drop support for Chahed as it did with his predecessor, Habib Essid, to protect its truce with Nidaa Tounes and its founder, President Beji Caid Essebsi.

“I expect based on information from insider sources that after October 15, which is the deadline for the government to submit the draft budget for 2019, Youssef Chahed will submit his resignation to the president of the republic,” former minister Hatem El Euch wrote on social media.